China could stand to benefit economically if it can successfully replace coal with renewable energy, according to a report by financial analytics company TransitionZero.
The study looked at the costs, or savings, that the Chinese government would incur if it replaced its existing coal-fired power plants with zero-carbon alternatives.
“What we found is China could save $1.6 trillion by doing that,” said Matthew Gray, co-CEO of TransitionZero, a London-based firm.
“There’s a huge economic incentive for China to get off coal,” he told CNBC’s “Capital Connection” on Thursday.
China has ‘great deal of work’ to do
They’re going to have to shut down those coal-fired power plants by 2040 or shortly thereafter, and that is going to be a huge challenge.
Gray said the first thing China needs to do is stop investing in new coal-fired power plants, noting that they are “long-life assets” that may still be in operation in 40 years’ time.
“Anything built now — if China is to meet its net-zero target — will need to be shut down prematurely and therefore be a stranded assets risk problem,” he said.
According to data from the Global Energy Monitor (GEM), there are 1,082 coal-fired power plants operating in China. Additionally, 92 plants are under construction and 135 are in the pre-construction phase.
Photovoltaic panels cover Tiangang Lake in Suqian, Jiangsu province, China, April 13, 2021.
Costfoto | Barcroft Media | Getty Images
Gray pointed out that China “already dominates zero-carbon technologies” — such as electric vehicles, solar energy and battery storage, and said the country is able to expand that infrastructure in order to reach its net-zero emissions goal.
The “far more concerning” aspect is whether China is willing and able to wind down its coal-powered plants. “They’re going to have to shut down those coal-fired power plants by 2040 or shortly thereafter, and that is going to be a huge challenge,” he said.
A report by GEM found that China commissioned 38.4 gigawatts of new coal plants in 2020, more than offsetting the 37.8 gigawatts of coal plants that were retired in other parts of the world last year.
“There’s a great deal of work that China will still need to do,” said TransitionZero’s Gray.